$200,000 penalty imposed for misleading claims about farmgate milk price
Staff Writer |
The Federal Court in Australia has ordered former Murray Goulburn Co-operative Managing Director Gary Helou to pay $200,000 in penalties for being knowingly concerned in Murray Goulburn’s false or misleading claims about the farmgate milk price it expected to pay dairy farmers during the 2015-16 milk season.
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“The penalty imposed against Mr Helou reflects his seniority at Murray Goulburn and involvement in misleading representations about the farmgate milk price,†ACCC Deputy Chair Mick Keogh said.
Murray Goulburn admitted to making false or misleading representations in breach of the Australian Consumer Law when it represented to farmers in Victoria, South Australia and southern New South Wales on 29 February 2016, and subsequently until 27 April 2016, that it could maintain its opening milk price of $5.60/kgms.
Mr Helou has admitted he was involved in the misleading representations made by Murray Goulburn. This included not informing farmers of risks known to Murray Goulburn and making unfounded assumptions that Murray Goulburn could achieve its milk powder sachet sales targets.
“Murray Goulburn’s misrepresentations meant farmers were not informed of the likelihood the final milk price would fall below the opening price. This was important information for farmers as it would have influenced the business decisions each farmer made,†Mr Keogh said.
“Farmers were denied the opportunity to plan for the impact of the reduced milk price on their businesses between February and April 2016, including implementing measures to reduce their exposure to a decrease in the milk price or shopping their milk around to other dairy processors.â€
The ACCC did not seek a penalty against Murray Goulburn because as it was a co-operative, any penalty imposed against it could end up being paid by the very farmers that were misled.
“We were conscious not to seek penalty orders that would adversely affect farmers for the wrongs committed by Murray Goulburn, so we focused on obtaining appropriate orders against the individuals involved in the conduct,†Mr Keogh added.
As part of the resolution of the proceedings, Mr Helou has undertaken to the Court that he will not be involved in the dairy industry for three years.
In August 2018, the ACCC resolved its proceedings against Murray Goulburn’s former Chief Financial Officer, Mr Bradley Hingle, after he consented to an order that he pay a contribution to the ACCC’s costs and gave an undertaking to the Court that he wouldn’t be involved in the dairy industry for three years.
The Court also ordered by consent that Murray Goulburn and Mr Helou pay a portion of the ACCC’s legal costs.
The farmgate milk price (FMP) was a weighted average price that Murray Goulburn paid to dairy farmers from whom it acquired milk. It was stated as a dollar amount per kilogram of milk solids (kgms)
Before the start of each financial year, Murray Goulburn would announce an ‘opening price’ FMP, being the average FMP that it would pay to farmers from the start of the financial year. The opening FMP was expected to be the average minimum price farmers would receive during the financial year, and it was set at a conservative amount to facilitate increases, known as ‘step-ups’, throughout the year.
At or before the start of a financial year, Murray Goulburn also announced its ‘forecast Final FMP’, which was the average FMP that it expected to pay to a farmer for premium quality milk acquired from them that financial year, and which was calculated at the end of that financial year. Throughout the financial year, the forecast Final FMP was updated, typically by way of ‘step-ups’.
Murray Goulburn exclusively set and revised its opening and forecast final FMP for the season.
On 1 May 2018, the operating assets and liabilities of Murray Goulburn were acquired by Saputo, a Canadian multi-national. Murray Goulburn continues to exist as a legal entity but only to deal with the ACCC and ASIC proceedings and current and future class actions.
Murray Goulburn retained approximately $200 million to deal with these liabilities, with any unspent money to be distributed to farmer shareholders and unitholders.
Through an inquiry into the dairy industry, the ACCC made a number of recommendations, including for a mandatory code of conduct, which it hopes will address problems caused by bargaining power imbalances between processors and farmers.
The maximum penalty available per contravention under the ACL at the time of the conduct was $1.1 million for corporations and $220,000 for individuals. ■